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Document of

The World Bank

Report No: ICR00004110

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-54360 & IDA-57400)

ON A

SERIES OF CREDITS

IN THE AMOUNT OF SDR744 MILLION

(US$1.1 BILLION)

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR

POWER SECTOR REFORM DEVELOPMENT POLICY CREDITS I & II

December 29, 2017

Energy and Extractives Global Practices Global Practice

South Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective as of December 31, 2016)

Currency Unit = Pakistan Rupee (PKR)

US$1.00 = PKR 104.375

SDR 1.00 = US $1.34433

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank

BISP Benazir Income Support Programme

CPPA-G Central Power Purchasing Agency

(Guarantee) Limited

CPS Country Partnership Strategy

DPC Development Policy Credit

Disco Distribution Company, (WAPDA

successor company)

ECC Economic Coordination Committee (of the

Pakistan Cabinet)

EFF Extended Fund Facility (of IMF)

FBR Federal Board of Revenue

FDI Foreign Direct Investment

FGD Flue Gas Desulfurization

GDP Gross Domestic Product

Genco Generation Company (WAPDA Successor

Company)

GHG Greenhouse Gas

GWh Gigawatt Hour

HESCO Hyderabad Electric Supply Company

HFO Heavy Fuel Oil

Hydel Hydroelectric

IDA International Development Association

IFC International Finance Corporation

IPP Independent Power Producer

JICA Japan International Cooperation Agency

KESC Karachi Electric Supply Company Limited

(now K-Electric)

kWh Kilowatt Hour

MEPCO Multan Electric Power Company

MoF Ministry of Finance

MPNR Ministry of Petroleum and Natural

Resources

MW Megawatt

MWP Ministry of Water and Power

MTB Market Treasury Bill

MYT Multiyear tariff

NDT NEPRA-determined Tariff

NEPRA National Electric Power Regulatory

Authority

NPL Non-Performing Loan

NTDC National Transmission and Dispatch

Company

OGRA Oil and Gas Regulatory Authority

PEFA Public Expenditure and Financial

Accountability

PESCO Peshawar Electric Supply Company

PFM Public Financial Management

PMT Proxy Means Test

PSIA Poverty and Social Impact Assessment

SBP State Bank of Pakistan

SDR Special Drawing Rights

SEPCO Sukkur Electric Power Company

SOE State owned Enterprise

USAID United States Agency for International

Development

WAPDA Water and Power Development Authority

Senior Global Practice Director:

Practice Manager:

Task Team Leader:

ICR Team Leader:

Riccardo Puliti

Demetrios Papathanasiou

Richard J. Spencer

Fanny Missfeldt-Ringius

iii

ISLAMIC REPUBLIC OF PAKISTAN DEVELOPMENT POLICY CREDITS I & II

IMPLEMENTATION COMPLETION REPORT

CONTENTS

Data Sheet

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and Theme Codes

E. Bank Staff

F. Results Framework Analysis

G. Ratings of Program Performance in ISRs

H. Restructuring

1. Program Context, Development Objectives and Design ......................................................... 1 2. Key Factors Affecting Implementation and Outcomes ........................................................... 4 3. Assessment of Outcomes ....................................................................................................... 12

4. Assessment of Risk to Development Outcome ..................................................................... 20 5. Assessment of Bank and Borrower Performance .................................................................. 21

6. Lessons Learned (both operation-specific and of wide general application) ........................ 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ....................... 24 Annex 1: Bank Lending and Implementation Support/Supervision Processes ............................ 25

Annex 2: Development Outcome Indicators ................................................................................ 27 Annex 3: Stakeholder Workshop Report and Results ................................................................... 28

Annex 4: Summary of Borrower’s ICR and/or Comments on Draft ICR ................................... 29 Annex 5: Comments of Co-financiers and Other Partners/Stakeholders ..................................... 30

Annex 6: List of Supporting Documents ..................................................................................... 31

iv

A. Basic Information

Program 1

Country Pakistan Program Name Power Sector Reform

Development Policy Credit

Program ID P128258 L/C/TF Number(s) IDA-54360

ICR Date 12/07/2017 ICR Type Core ICR

Lending Instrument DPL Borrower Islamic Republic of

Pakistan

Original Total

Commitment SDR 387.80M Disbursed Amount SDR 387.80M

Implementing Agency: Ministry of Finance

Co-financiers and Other External Partners: N/A

Program 2

Country Pakistan Program Name

Power Sector Reform:

Second Development

Policy Credit

Program ID P152021 L/C/TF Number(s) IDA-57400

ICR Date 12/07/2017 ICR Type Core ICR

Lending Instrument DPC Borrower Islamic Republic of

Pakistan

Original Total

Commitment SDR 356.20M Disbursed Amount SDR 356.20M

Implementing Agency: Ministry of Finance

Co-financiers and Other External Partners: N/A

v

B. Key Dates

Power Sector Reform: Development Policy Credit - P128258

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 10/28/2013 Effectiveness: 05/06/2014

Appraisal: 03/20/2014 Restructuring(s): - -

Approval: 05/01/2014 Mid-term Review: - -

Closing: 06/30/2015 06/30/2015

Power Sector Reform: Second Development Policy Credit - P152021

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 01/28/2015 Effectiveness: 12/04/2015 12/31/2016

Appraisal: 09/22/2015 Restructuring(s): - -

Approval: 11/12/2015 Mid-term Review: - -

Closing: 12/31/2016 12/31/2016

C. Ratings Summary

C.1 Performance Rating by ICR

Overall Program Rating

Outcomes Satisfactory

Risk to Development Outcome High

Bank Performance Highly Satisfactory

Borrower Performance Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Overall Program Rating

Bank Ratings Borrower Ratings

Quality at Entry Highly Satisfactory Government: Satisfactory

Quality of Supervision: Highly Satisfactory Implementing

Agencies Satisfactory

Overall Bank

Performance Highly Satisfactory

Overall Borrower

Performance Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators


Implementation Performance Indicators QAG Assessments Rating

Potential Problem

Program at any time No Quality at Entry None

Problem Program at any Time No Quality of

Supervision None

DO rating before

Closing Satisfactory

vi


Implementation

Performance Indicators QAG Assessments Rating

Potential Problem

Program at any time No Quality at Entry None

Problem Program at any

time (Yes/No): No Quality of Supervision None

DO rating before

Closing/Inactive status

Moderately

Satisfactory

D. Sector and Theme Codes


Original Actual

Major Sector

Energy and Extractives

Other Energy and Extractives 100 100

Major Theme/Theme/Sub Theme

Public Administration 33 33

Public Finance Management 6 6

Business Enabling Environment 56 56

Fiscal Policy 6 6


Original Actual

Major Sector

Energy and Extractives

Other Energy and Extractives 75 75

Oil and Gas 25 25

Major Theme/Theme/Sub Theme

Public Finance Management 19 19

Business Enabling Environment 45 45

Fiscal Policy 19 19

E. Bank Staff


Positions At ICR At Approval

Vice President: Annette Dixon Philippe Le Houerou

Country Director: Patchamuthu Illangovan Rachid Benmessaoud

Practice Manager/Manager: Demetrios Papathanasiou Julia Bucknall

Task Team Leader: Richard J. Spencer Richard J. Spencer

ICR Team Leader: Fanny Missfeldt-Ringius -

ICR Primary Author: Sati Achath -

vii


Positions At ICR At Approval

Vice President: Annette Dixon Philippe Le Houerou

Country Director: Patchamuthu Illangovan Patchamuthu Illangovan

Practice Manager/Manager: Demetrios Papathanasiou Julia Bucknall

Task Team Leader: Richard J. Spencer Richard J. Spencer

ICR Team Leader: Fanny Missfeldt-Ringius -

ICR Co-author: Sati Achath -

F. Results Framework Analysis

Program Development Objectives (PDOs)

The objective of the DPC program was to support the government of Pakistan in: (i) reducing

subsidies and improving tariff policy; (ii) improving sector performance and opening the market

to private participation; and (iii) ensuring accountability and transparency.

viii

PDO Indicator(s)

Power Sector Reform: Development Policy Credits 1 and 2

Indicator Baseline Value DPC1 Target

(end FY15/16)

DPC2 Target

(end

FY15/16)1

Actual Achieved

at Completion or

Target Years

Policy Area A: Reducing Subsidies and Improving Tariff Policy

A.1. Subsidies allocated in

Federal budget (as % of budget) 1.80% 0.40% 0.80% 0.70%

Date achieved 30 June 2013 30 June 2016 30 June 2016 30 June 2016

Comments (incl. % achievement) DPC2 target overachieved. Original target changed from 0.4% to 0.8%

of GDP (see table 2).

Policy Area B: Improving Sector Performance and Opening the Market to Private Participation

B1. Increased bill collection in

DISCOs (% of total billing) 86% 90% 94% 94.60%


Comments (incl. % achievement) Targets overachieved.

B2. Increased gas supply 3.8 billion SCFD 5 billion SCFD 3.9 billion SCFD

Date achieved 30 June 2013 30 June 2016 30 June 2016

Comments (incl. % achievement) Target not achieved.

B3. Separation of market

operations and transmission

system operations

Market and system

operations in

single entity

(NTDC/ CPPA-G)

All contracted

power generated

by IPPs,

GENCOs and

WAPDA Hydel

traded through an

independent

CPPA-G

All contracted

power generated

by IPPs, GENCOs

and WAPDA

Hydel traded

through an

independent

CPPA-G


Comments (incl. % achievement) Achieved.

Policy Area C: Ensuring Accountability and Transparency

C1. Disco performance reports

and NEPRA review published None Yes Yes


Comments (incl. % achievement) Achieved.

G. Ratings of Program Performance in ISRs

Power Sector Reform: First Development Policy Credit - P128258

No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 05/20/2015 Satisfactory Satisfactory 603.79

1 Listed if different from DPC1 target.

ix


No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 12/13/2016 Moderately Satisfactory Satisfactory 489.39

H. Restructuring (if any)

Not applicable.

1

1. Program Context, Development Objectives and Design

1.1 Context at Appraisal

1. The program was prepared at a time when Pakistan’s energy sector performance was

weak. Over the previous five years, Gross Domestic Product (GDP) growth had averaged only

3.6 percent, barely keeping pace with population increase. Low growth was in part the result of

recurrent natural disasters, including severe floods in 2010 and 2011, and a difficult security

situation. Economic management was poor, and much-needed structural reforms had been

neglected. Productivity growth had slowed, private investment had fallen, the external position

had weakened, and Central Bank reserves had declined to critical levels. The fiscal deficit for

fiscal year 2012/2013 (fiscal year (FY)12/13) was 7.6 percent of GDP and was projected to

increase further in the coming year.

2. Pakistan’s energy sector was facing a serious crisis, especially in electricity. In FY12/13,

shortages averaged 4,000-5,000 Mega-Watt (MW), meaning that about one quarter of demand

was not met. At the same time, up to 5,000 MW of capacity was lying idle because an acute

liquidity crisis among generators prevented sufficient fuel from being purchased. Yet in the

same year, the government provided subsidies to the sector that amounted to four times federal

expenditure on the health and education sectors. Both personal and economic life in Pakistan

were deeply affected by routine load shedding of 8-9 hours daily, and sometimes even more.

3. The poorly performing electricity sector was thought to have reduced GDP growth by 2

percent per annum for the past several years. The sector relied heavily on government support

through direct subsidies amounting to about 1.8 percent of GDP in FY12/13. Costs that could not

be recovered from consumers or the government were accumulated in the books of the public

electricity distribution companies (Discos). The Discos in turn failed to pay fully for goods and

services they received, especially electricity generated by independent power producers (IPPs).

4. Commonly called the circular debt2, these accumulated arrears amounted to about four

percent of GDP in FY12/13. Actions were required to address two main distortions: the

longstanding gap between the cost of service and revenues gained either from tariffs or subsides;

and the unusually high cost of providing that service. At the same time, there was a need to

address the inequities caused by poorly targeted subsidies to ensure that the sector developed in a

socially and environmentally sustainable way.

5. The reforms of the energy sector in Pakistan had begun with the support of the World

Bank in July 1992 when the government of Pakistan adopted a strategic plan for the unbundling

of the energy sector, that up to that point had been vertically integrated. It was to open the door

for private sector participation, which in turn was to bring more resources and efficiency of

implementation. As in FY12/13, the government was facing a non-sustainable fiscal situation.

Attracting private partners to finance generation moved forward with the adoption of the 1994

“Policy Framework and Package of Incentives for Private Sector Power Generation.”

2 Circular debt is being referred to as the amount of cash shortfall within the CPPA-G, which it cannot pay to power

supply companies. This shortfall is the result of (a) the difference between the actual cost of providing electricity

and the revenue realized by the Discos from sales to customers, plus subsidies; and (b) insufficient payments by

Discos to CPPA-G out of the revenue realized (due to prioritizing their own needs before payments).

2

6. This policy proved highly successful with the financial close of about 20 IPPs with a total

capacity of 4,500 MW and total leveraged foreign debt of about US$3 billion. However, in

hindsight the program lacked a transparent mechanism to select those power plants that were part

of the least-cost expansion plan, and an upper threshold of power plants to be installed (the

World Bank had recommended a limit of 2,000 MW).

7. Partly because of a lower than expected demand, and partly due to the inability of the

government to raise tariffs and rain in the inefficiencies of the distribution sector (losses,

collections), the overall cost of the program was too high for the sector to absorb. Rather than

forcefully moving forward the needed reforms to improve the performance of the Discos, the

government focused on renegotiating the agreements with the IPPs over a period of nearly ten

years. It left the relationship between the private sector and government bruised. This together

with a lack of investments in hydropower led to the shortfall of power experienced in FY12/13

and an ever-growing need for subsidies for the power sector stifling economic development

elsewhere.

8. The general election of April 2013 delivered a new Federal government with an absolute

majority, and presaged the first democratic-to-democratic government handover. The strong

mandate enabled a bold reform agenda aimed at stimulating growth. The government agreed a

three-year Extended Fund Facility (EFF) agreement with the IMF early in its term, a major

feature of which was structural reform of the energy sector. Other major donors were also

undertaking programs aligned with the reform of the sector, most notably the Asian

Development Bank (ADB), Japan (JICA), the UK and the US.

9. The World Bank prepared two independent Development Policy Credit (DPC) series in

support of the IMF program. Aside from the DPC series dedicated to the energy sector and under

review in this ICR, there was a DPC series supporting “Fiscally Sustainable and Inclusive

Growth,” which was also a series of two DPCs and focused on macroeconomic reform, including

financial sector, business environment, revenue collection, and privatization. Both DPC series

were prepared in close collaboration across the teams. The strong partnership of international

organizations and donors together with a determined new government led to a success of all

programs across the board, and broke the record of a series of unsuccessful fiscal DPCs and IMF

programs.

Rationale for Bank Assistance

10. The new government identified its strategy around the ‘four Es’: energy, economy,

extremism and education. The Country Partnership Strategy (CPS) planned to be in place from

the start of FY15 reflected similar aims in its four pillars: transforming the energy sector; private

sector development; reaching the underserved, neglected and poor; and service delivery. The

program for the energy pillar of the CPS reflected a twin-track approach: sector reform,

accompanied by investment aimed at improving efficiency and reducing costs. The CPS had

been built up through a wide process that included broad consultation across all sections of civil

society in Pakistan.

11. Early actions by the government included the transfer of the circular debt directly onto its

books in June 2013 and the adoption of a National Power Policy in July 2013. In August and

October 2013, it implemented substantial tariff increases. The coincidence of a new and

empowered government, an IMF program and broad consensus among business, households and

3

donors on the need for deep reform offered a solid opportunity for tackling the most challenging

issues of the power sector.

12. The DPC series formed the cornerstone of Bank’s engagement on the policy side and

supported the Government in deepening this agenda. Lessons from development policy

financing in Pakistan in the early 2000 period pointed clearly towards the need for energy reform

to be supported through separate, sectoral instruments.

1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved)

The original PDOs were:

(i) Reduce subsidies and improve tariff policy.

(ii) Improve sector performance and open the market to private participation.

(iii) Ensure accountability and transparency.

Original Key Results Indicators:

13. The following results indicators were selected for the program:

(i) Reduced subsidies allocated in the federal budget from a baseline of 1.8 percent of GDP

in FY12/13 to 0.4 percent by the end of FY15/16.

(ii) Increased bill collection in Discos from a baseline of 86 percent of bills collected in

FY12/13 to 90 percent of bills collected in FY15/16.

(iii) Increased domestic gas supply from 3.8 billion standard cubic feet per day in FY12/13 to

5 billion standard cubic feet per day in FY 15/16.

(iv) All contracted power generated by IPPs, Gencos and WAPDA Hydel traded through an

independent Central Power Purchasing Agency by the end of FY 15/16.

(v) Household consumer awareness of the extent to which the government subsidizes

electricity from a baseline of zero in FY12/13 to 25 percent of all household consumers

by FY15/16.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators

14. The PDO was not changed. Between DPC-1 and DPC-2 the following indicators were

revised:

(i) Reduced subsidies allocated in the federal budget. The end of program target was revised

from 0.4 percent by the end of FY15/16 to 0.8 percent by the end of FY15/16.

(ii) Increased bill collection in Discos. The end of program target was revised from 90

percent of bills collected in FY15/16 to 94 percent of bills collected in FY15/16.

(v) Disco performance reports and NEPRA review published from a baseline of zero in

FY12/13 to a target of the reports and review published [no date given].

1.4 Original Policy Areas Supported by the Program (as approved)

15. The DPC program series supported the government’s reforms in three policy areas:

(i) Reduce subsidies and improve tariff policy: This programmatic area supported reducing,

making more transparent, and better targeting subsidies to support the financial viability of the

sector and improve the government’s fiscal position. Measures in this area aimed to limit

subsidies, move tariffs to levels consistent with recovery of reasonable costs incurred through

efficient operations, and strengthen the role of the sector’s economic regulator, the National

Electric Power Regulatory Authority (NEPRA).

4

(ii) Improve sector performance and open the market to private participation: Support was

provided to: (a) reduce electricity theft and increase bill collection by the Discos; (b) increase gas

supply; and (c) move the electricity sector towards market-oriented operation.

(iii) Ensure accountability and transparency: To ensure broader stakeholder support, the DPC

program improved monitoring, governance, transparency and rigor in reporting of results in the

energy sector. Actions included monitoring and self-reporting mechanisms for sector entities,

and oversight by independent experts.

1.5 Revised Policy Areas (if applicable):

16. The policy areas were not changed during implementation.

1.6 Other significant changes

17. Changes were made to the indicative triggers and results indicators for DPC-2 during

preparation to react to changing circumstances during the operation, and the evolving dialogue.

The changes made and their rationale are discussed in Section 2.1, Program Performance, below.

2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance

18. The Power Sector Reform Credits consisted of two programmatic DPCs with the

schedule and amounts as set out in Table 1.

Table 1: Power Sector Reform DPC Series: Operation Schedule

Operation

Approval

Dates

Disbursed Amount

(US$ Million)

Actual

Closing Date

DPC 1 (P128258) 05/01/2014 603.79 06/30/2015

DPC 2 (P152021) 11/12/2015 489.39 12/31/2016

19. Several of the indicative DPC-2 triggers set out in the Program Document for DPC-1

were modified during preparation of DPC-2, as were some of the outcome indicators. They

recognized changes in approach agreed during the continued dialog between the authorities and

the Bank. Table 2 sets out the program performance, adjustments and the outcomes.

5

Table 2: Program Performance, Adjustments and Outcomes

Prior Actions DPC 1 Indicative Triggers in DPC 1 for DPC 2 Prior Actions DPC 2 Changes, Performance and Outcomes


1. Ministry of Water and Power notifies

the revised tariffs determined by NEPRA

resulting in an average 44% tariff increase

for industrial, commercial, and bulk

consumers and an average 32% increase

for households using more than

200kWh/month, agriculture and other

consumers compared with tariffs effective

June 2013.

1. Following the mechanism in 2014

Tariff and Subsidy Policy Guidelines,

MWP informs NEPRA of the FY14/15

budgeted subsidy to incorporate in the

tariff determination of each Disco, to

apply in FY14/15 expected to result in

electricity subsidies to be reduced to 0.7%

of GDP.

1. Following the mechanism in 2014

Tariff and Subsidy Policy Guidelines,

MWP has informed NEPRA of the

FY14/15 subsidies by consumer category

to incorporate in the tariff determination

of each Disco, to apply in FY14/15

expected to result in electricity subsidies

to be reduced to 0.8% of GDP.

Minor change to accommodate the way

notification is done. Based on NEPRA

determination in March 2015 the subsidy amount

was 0.7% of forecasts. By the time of notification

in June 2015 a changed consumer mix and

slightly lower GDP resulted in an increase to

0.9%. In the target fiscal year 2016, a lower level

of 0.7 percent was reached.

Monitored through result indicator A1: Reduced

subsidies allocated in Federal budget. Baseline in

FY12/13: 1.8% of GDP; period between DPC-1

and DPC-2, reduced to 1.2% of GDP in FY

12/13, 0.9% of GDP by end FY14/15, and 0.7%

by end of FY15/16. Original program target of

0.4% of GDP was not achievable because of

continued government commitment to provide

subsidies to consumers using up to

300kWh/month. Tracked using government-

provided data.

2. MoF settles power sector circular debt

in the amount of PKR 480 billion.

2. Further to Prior Action 3 of DPC 1: (i)

NEPRA issues guidelines for Disco tariff

determination covering principles,

methodologies, timetable, formula and

procedures for both annual and multi-year

tariff (MYT); and (ii) MWP publishes in

its website a cap for total overdue

payables to power generators not to

exceed [PKR 220 billion]; and (iii)

overdue payables to power generators are

below the cap for at least [3] months.

2. MWP has published in its website a

cap for total overdue payables to power

generators not to exceed PKR 314 billion

and a plan to reduce the flow of new

overdue payables to PKR 39 billion by

FY17/18, with interim targets for the

flows of PKR 92 billion in FY15/16 and

PKR 57 billion in FY16/17.

The action was simplified to focus on key action

in the original trigger, namely the cap on circular

debt and strengthened by an action plan to phase

it out, which government published. It was

subsequently monitored as part of the IMF

program.

Monitored through result indicator B1: increased

bill collection by Discos. Baseline in FY12/13:

86%; target in FY15/16: 94%. Tracked in

collaboration with the IMF program, which was

reviewed quarterly. The Bank supported the

review process.

6


3. Economic Coordination Committee

(ECC) approves the Tariff and Subsidy

Policy Guidelines covering: (i) subsidy

policy for low-income residential

customers; (ii) multi-year tariffs; (iii)

equalization mechanism and guidance for

tariff setting as envisaged in the NEPRA

Act, including forward looking fuel price

adjustments; and (iv) guidance for

circular debt management related to

overdue payables to generators by CPPA-

G.

3. The Government has implemented a

mechanism based on tariff surcharges and

a Tariff Rationalization Fund to maintain

nationwide uniform tariffs in Discos

while ensuring cost recovery.

This new action was included to give credit for an

important structural reform that shifted the cost

from the national uniform tariff on to the

electricity consumer, done at a time to take

advantage of falling oil prices.

The team suggested that this action was

opportunistic and identified in the dialogue during

preparation of DPC-2. Nevertheless, given that

the tariff setting process adopted mechanics for

adjustment to ensure cost recovery, subsidies will

be reduced in the long run.


4. (i) MWP instructs PESCO, HESCO,

SEPCO, and MEPCO to outsource to the

private sector collection of their

respective feeders with losses of 50% or

above; (ii) MWP instructs all Discos to

implement a revenue protection program

that ensures correct billing, reduces

losses, in particular theft, and improves

collections; (iii) Council of Common

Interests initiates discussion on a

mechanism to automatically withhold a

proportion of the electricity arrears of

provincial government entities; and (iv)

Federal Government establishes

mechanism to withhold budget transfers

to federal agencies or entities which have

arrears of payment for electricity that

exceed 90 days of billing by Discos.

3. Each Disco identifies and assesses

existing consumer receivables and their

respective recoverability to reflect, in

accordance with the Companies

Ordinance and the General Accounting

Practices, re-classification and

provisioning of the qualified receivables

in its audited financial statements for

fiscal year ended 30 June 2014.

The action was dropped This action was completed satisfactorily and the

accounts reflected the change. Nevertheless, the

action did not adequately reflect the outcome

being sought, namely to increase collections in

Discos which was included in the circular debt

plan completed under prior action 2 in DPC-2.

7


5. (i) MPNR discloses the 2013 Model

Petroleum Concession Agreement on its

website; (ii) MPNR announces the award

of petroleum exploration blocks for the

2013 bidding round; and (iii) OGRA

issues at least 3 pricing notifications to

enable producers to start developing new

and incremental gas production with

increased prices allowed under the 2012

Petroleum Policy.

4. MPNR notifies rules for enhancing gas

production from producing, dormant or

under-producing concessions.

4. MPNR has signed supplemental

agreements agreeing revised prices for 92

exploration concessions and production

leases at the levels set out in the 2012

Petroleum Policy, including 26 with the

private sector.

The replacement action addressed a long-

outstanding issue of greater concern to gas

exploration and production companies. It was

expected to increase domestic gas production

more rapidly. Measured through result indicator

B2, Increased gas supply: from a baseline in

FY12/ 13 of 3.8 billion standard cubic feet per

day (bcfd) to a target at the end of FY15/16 of 5

bcfd.

Tracked through dialogue with MPNR which

provided relevant data.

5. The Economic Coordination

Committee of the Cabinet has approved

policy directives that LNG will be

provided to consumers who pay its full

cost through the tariff.

This new action was introduced in response to the

plan to import significant quantities of LNG.

Supports adoption of a sound policy that will

improve investor confidence and avoid risk of gas

being diverted to segments where costs cannot be

recovered. The LNG imports contributed to result

indicator B2.

Identified through dialogue with MPNR.

Dialogue led to support for wide ranging gas

sector reform.

6. CPPA-G’s Memorandum and Articles

of Association amended to establish

CPPA-G as an agent to purchase

electricity on behalf of distribution

companies (including Discos); and

CPPA-G and Genco Holding Company

endorse Heads of Agreement reflecting

key principles for Power Purchase

Agreements (PPAs) for existing thermal

plants, with energy price based on heat

rate testing.

5. (i) NTDC files request and NEPRA

amends NTDC license to remove CPPA-

G functions and NTDC’s authority to

purchase or sell electricity; and (ii)

CPPA-G signs an energy supply

agreement with each Disco to procure

power on its behalf.

6. (i) CPPA-G signs on behalf of Discos

PPA with WAPDA Hydel for existing

plant and PPAs with all Gencos, one PPA

for each existing operational thermal

plant of Gencos; and (ii) WAPDA enters

into agreement with CPPA-G for

administration of current PPAs of IPPs

under 1994 policy.

6. (i) CPPA-G has demonstrated

operational capability to handle all steps

in the billing and settlement cycle of

electricity sales by Generators and

purchases by Discos; and (ii) NEPRA has

granted an amendment to NTDC license

to eliminate CPPA-G functions.

The single revised action better focused on the

desired outcome of the original two triggers rather

than processes leading to it, and reduced the risk

of reversal. Measured through result indicator

B3, separation of market operations and

transmission system operations: from a baseline

in FY12/13 of market and system operations

being in a single entity (NTDC/CPPA-G) to a

target in FY15/16 for all contracted power

generated by IPPs, GENCOs and WAPDA Hydel

being traded through an independent CPPA-G

acting on behalf of Discos.

Change was agreed through dialogue with MWP,

NEPRA and NTDC.

8



7. NTDC implements web-based open

access to operational information,

including merit order, and daily payment

instruction to generators.

7. CPPA-G implements web-based

access to monthly amount due and

payment by each Disco including arrears,

to CPPA-G and by CPPA-G to

generators.

7. CPPA-G publicly disclosed on its

website the monthly amounts due, and

payments made, by each Disco to CPPA-

G, and by CPPA-G to Generators,

including arrears.

Largely rewording, but introduced public access

to information and supported transparency for

privatization. Tracked through regular

monitoring of the CPPA-G web site by task team,

and feedback to MWP as the owner of CPPA-G

when performance lagged.

8. Each Disco (i) includes subsidy

amount in customer’s bills; and (ii)

publishes on its website monthly billing

and collection data aggregated by

consumer category.

8. MWP implements public web-based

access to monthly results of performance

contracts signed with Discos, NTDC and

Gencos.

9. NEPRA publishes at least monthly on

its website, information provided by all

licensees on selected performance

standards results and indicators.

8. NEPRA has disclosed the annual

Discos’ performance and evaluation

report, and has initiated outreach action to

consumers on the content thereof; and

Discos have disclosed on their respective

websites their annual performance

reports, including their plans to improve

service delivery.

Combined the two triggers and focused on

monitoring of performance of licensees through

regulator rather than management by MWP. Was

also aimed at building consumer awareness of

comparative Disco performance. Measured

through result indicator C1, Disco performance

reports and NEPRA review published from a

baseline of no publication in FY12/13 to a target

of the reports and review published (not dated in

original program document).

9. ECC approves establishment of

monitoring units within both MWP and

MPNR with responsibilities for

monitoring the energy sector, reporting on

a quarterly basis; and MWP and MPNR

formulate the scope of work for advisors

who will review the quarterly monitoring

reports and make those reviews public.

9

2.2 Major Factors Affecting Implementation:

20. Preparation and early implementation of the operation was positively affected by the

following factors:

Strong government commitment: The new government publicly expressed its commitment

to reducing the chronic electricity shortages and sector indebtedness, as well as introducing

sector reforms that had been planned for a number of years. The program was largely driven

by the government reform agenda and its commitment, specifically, to end load shedding in

2017, before the end of its term in power.

Harmonized messaging from development partners: The program was jointly prepared and

monitored with Asian Development Bank (ADB) and Japan International Cooperation

Agency (JICA) using a shared policy matrix, though with minor differences. It was part of a

wider program of support which included an IMF extended arrangement, a substantial focus

of which was structural adjustment in the energy sector. The UK and US, two other key

donors also coordinated their policy dialogue. The harmonized messaging allowed the

government to focus on a single set of agreed actions, while providing additional leverage for

the donors.

The first operation focused on crisis management, the second on reform. The first

operation focused on the immediate actions required to get the sector functioning adequately,

with the intention of enabling deeper reforms, that needed to be rooted in a functioning sector

in the second operation. This approach was well aligned with the government’s interests but

risked the later and more difficult reforms not being followed through adequately.

Lessons learned from previous operations: The program drew on previous experience with

energy policy lending in Pakistan3 and elsewhere, in particular by ensuring:

(i) Executing dedicated sector operations rather inserting a limited number of prior actions in

a multi-sector or general macro-economic support operation.

(ii) Continuous assessment of progress and adaptation as the reform evolved, including

changing indicative triggers and indicators. This was greatly facilitated by the regular

review of the IMF program in which the Bank participated

(iii)Precise definitions of actions, and when they were considered complete were prepared in

advance and documented in a separate program Technical Memorandum.

Prior actions were designed to trigger further reform works. The prior action that

introduced the policy that the users of LNG should pay the full cost of gas triggered a major

reform of the downstream gas sector, while the work on gas concessions has triggered

upstream reform, including plans to create an independent regulator. The Bank has

supported these further reforms through ASA.

3 Particularly Independent Evaluation Group, World Bank, Project Performance Assessment Report on Public Sector

Adjustment Loan/Credit (Ln 3645-PK, Cr. 2542-PK); Structural Adjustment Loan (Ln. 4435-PK); Structural

Adjustment Credit (Cr. 3515-PK); and Second Structural Adjustment Credit (Cr. 3655-PK), Report No. 34101,

December 19, 2005.

10

Soundness of background analysis underpinning the program: Given the long-standing

concerns with the performance of the power sector in Pakistan, there was a wealth of analysis

that had been prepared by the Bank and other development partners. Policy notes prepared in

the run up to the recent election had updated much of the earlier work and there was close

agreement between most parties on what was needed.

21. Later implementation of the program was negatively affected by the following factors:

Waning commitment to reform. With the passage of the most immediate crisis in the power

sector, the government commitment frayed. While MoF’s interest in the program remained

strong, MWP’s weakened, as it perceived it gained little from the reforms while having to

undertake the bulk of the work. This was not so obvious with MPNR, perhaps because of the

closer relationship between the two, based on MPNR’s role in raising revenue for

government.

Withdrawal from privatization program. Privatization was not made an explicit part of the

program but several prior actions were designed to support the government’s ambitions to

privatize the Gencos and Discos. Actions that supported this, and would have been sustained

by privatization include reduction of subsidies, improvement of performance, clarification of

contractual relationships and greater transparency.

Vested interests reduced the impact of the reforms. The separation of the National

Transmission and Dispatch Company (NTDC) and the Central Power Purchasing Agency

(CPPA-G) was delayed resulting in delayed appraisal of the second operation. While CPPA-

G has now become an independent agency, its mandate is still temporary and the

underpinning Commercial Code has not yet been fully revised, arguably because market

participants favor the status quo over moving to a wholesale market.

Limited capacity for follow through. In two examples, limited capacity has affected the

implementation of the reforms:

(i) MWP’s ability to prepare and implement a plan to reduce the circular debt slowed down

the process of restoring the sector’s financial viability. Partly in consequence, the

circular debt has continued to rise.

(ii) The management of upstream gas concessions have remained a bottleneck to increased

gas supplies. MPNR’s Directorate General of Petroleum Concessions had few and

poorly qualified staff. The volume of work required to manage new concessions exceeds

its capacity, contributing to the limited increase in domestic gas production.

Sustained implementation of some prior actions has been difficult. Some prior actions,

particularly where continued disclosure of information is required, have not been sustained.

In consequence, the chance has been lost of creating a virtuous circle of supply of

information bringing greater transparency to the sector.

22. Risk was broadly assessed correctly. The overall risk was assessed as high, with the

following factors identified:

Political, social and industrial opposition to increases in the retail electricity tariff and its

impact on inflation. The risk to the subsidized tariff did not materialize. Helped by the

marked reduction in oil prices, which are reflected in tariffs by a monthly adjustment

mechanism, tariffs fell during the DPC period. Some of the subsidies were clawed back by

11

not passing the full fuel price adjustments through to the subsidized consumer categories,

thus helping reduce the overall subsidy burden.

Judicial intervention delaying implementation of tariff adjustments and other reform

measures. The risk was assessed as moderate in the first operation and raised to substantial

in the second and may have been underestimated. Judicial interventions in the tariff policy

area affected two issues: surcharges and tariff determinations, and both these can impact the

sector’s financial position and hence put at risk the subsidy reduction outcome. Although

mitigation measures were adopted, they have not been effective.

Macroeconomic stability affected by vulnerability to external and internal shocks. The risk

did not materialize and was not specifically rated. If anything, the positive economic shock

of sharply reducing oil prices, that took place during the implementation of DPC-2 assisted in

achieving its objectives, by providing additional space for the government to reduce

subsidies in the sector.

Weak management in operating companies and excessive control by MWP. The risk was

correctly identified but underestimated. Weak management has continued to hold the sector

back, despite mitigation through performance contracts (which have since been allowed to

lapse), monitoring and criminalizing power theft. MWP has continued to manage the sector

closely. The abandonment of the privatization program and failure to follow through on the

mitigation has further worsened the effect of the risk. In consequence companies continue to

underperform.

Opposition from vested interests. The risk that vested interests would oppose

commercialization and increased accountability and access to information was correctly

identified. Substantial opposition to the changes, in detail rather than in principle, mostly

from within the sector and led in part by MWP, has reduced the effectiveness of some of the

reforms. Technical Assistance to NEPRA (by the Bank) and to CPPA-G (by ADB) has been

put in place but this has not been sufficient to avoid backtracking, so the mitigation has not

been fully effective.

The first operation front loaded politically challenging ‘no regrets’ actions. The risk

identified here was that while such actions were potent, it may have made it more difficult to

undertake the reforms to address more deep-rooted problems. This does seem to have been

the case.

Fiduciary risks were assessed as substantial. The mitigation identified was the new PEFA

Plus program that was initiated during the program. There have been no issues with

fiduciary aspects of any of the budget support operations, so it appears that the mitigation has

been satisfactory.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:

23. M&E Design: Design was satisfactory, and relied on a simple framework operating with

limited but key indicators that are linked to the CPF outcomes. Government of Pakistan and the

Bank used the Results Framework presented in Annex 2 as a monitoring tool. M&E was

designed to be reported jointly with ADB and JICA. Periodic monitoring and dialogue with the

relevant line ministries and other stakeholders involved in implementing the reforms was

designed to take place through Bank field missions and through staff on the ground in Pakistan.

The targets were slightly modified during implementation to better reflect the reform progress.

12

The indicators were relevant to the PDOs and the collection methods were those of the

government. Load shedding data, which would have been desirable as a monitoring indicator,

were not available because it was not made available by the Government.

24. M&E Implementation: The program relied on routinely reported indicators for

quantitative M&E purposes and carried out discussions with the stakeholders, all of whom were

responsive to requests for information. Regular monitoring of key issues took place through face

to face interaction and, more formally, during IMF program reviews, held quarterly. The MoF

provided necessary information regarding disbursement and utilization of the funds including

regular and reliable documentation on progress regarding the reform program.

25. M&E Utilization: Appropriate data collected by the Government on indicators were

evaluated and used during supervision missions, and for decision-making on policy work. The

information provided was used in dialogue with the Government in further shaping and

improving power sector governance. The same indicators were used for inputs to the program

Learning Review which took place in FY 17, when the operation closed. The information was

used to help develop how the Bank could further support the sector, particularly relating to gas

sector reforms.

2.4 Expected Next Phase/Follow-up Operation (if any):

26. The Bank formulated the program as a two-operation series. ADB formulated the

program as a five-operation series. The Bank informally considered whether its participation in

further operations as envisaged under the ADB program but decided against continuation.

3. Assessment of Outcomes

Rating: Satisfactory

3.1 Relevance of Objectives, Design and Implementation

27. Relevance of Objectives: The program objectives were relevant at the time of appraisal

and remain so at closing. The three policy areas: reducing subsidies and improving tariff policy;

improving sector performance and opening the market to private participation; and putting in

place accountability and transparency are central to improved sector performance. Improved

performance in the electric power sector and the wider energy sector is vital if Pakistan’s fiscal

sustainability, growth and job creation aspirations are to be met. The negative impact of the

performance of the electricity sector on businesses was noted again in 2018 where the World

Bank’s “Doing Business” report ranks Pakistan at 167 out of 190 countries in terms of the ease

with which business can get access to electricity. These were at the core of the Country

Partnership Strategy (CPS) for 2010-2014 and continue to be so in the CPS for 2015-2019.

28. Relevance of Design: The program design was relevant in that the design balanced

adaptation as reforms were implemented with a framework to ensure continued coherence. Prior

actions were precisely formulated to avoid any delays or failures to complete them. Indicative

triggers were adapted as required. The design took into account several key lessons from

previous experience in energy policy lending in Pakistan. Policy measures supported by the

program and results indicators were in line with the operation’s and higher level objectives set

out in the CPS.

29. Relevance of Implementation: Implementation arrangements enabled the operations to

remain relevant during implementation. The robust country office in Islamabad and the presence

13

of the Task Team Leader (TTL) in the field greatly facilitated implementation and monitoring on

a continuous basis.

3.2 Achievement of Program Development Objectives

30. The DPC operation was successful in achieving its objectives in which the government’s

actions paved way for attaining all of the triggers and most of the targeted outcomes of sector

reform. Progress on individual pillar objectives is detailed below:

Achievements under Policy Area A - Reducing Subsidies and Improving Tariff Policy:

31. At the heart of the measures taken under Policy Area A was the attempt to get a handle

on the “circular debt problem” that Pakistan’s energy sector is hostage of. Over the past decade

it reached up to 5 percent of nominal GDP. This circular debt problem follows from the Discos’

inability to recover their full cost either from their customers or the Government. The cash

shortfall means that they cannot pay the bills for electricity supplied to them. In turn, the public

generators are unable to pay their fuel bills, and IPPs curtail their supply. The consequent

shortages of electricity are the main cause of load shedding, and all the economic and social

consequences following on from there. The problem was well documented ahead of the DPC

(Trimble et al (2011) and USAID (2013)).

32. By targeting this singularly most important reason for failure of Pakistan’s power sector

in a head-on manner, the team – with full support from Bank management – demonstrated that

the DPC is a suitable instrument for energy sector challenges that are financially significant, but

otherwise near intractable. It is worthwhile noting that addressing the financial viability as a

single key issue in Pakistan had not been tried before. Other efforts had sought out secondary

objectives such as privatization or private sector participation as an indirect means to achieving

financial viability of Discos.

33. The combination of actions proposed under the DPC focused on (i) reducing the

subsidies allocated by the Federal government as a driver for better performance throughout; (ii)

cleaning up the debt problem (MoF settles the circular debt, and thereafter a debt ceiling is

maintained); and (iii) moving the tariff setting mechanism towards better cost recovery by

introducing automatic adjustments (see Table 2).

34. Results indicator A1: “Reduced subsidies allocated in Federal Budget”. The baseline

value was 1.8% of GDP. In the period between DPC-1 and DPC-2, subsidies were reduced to

1.2% of GDP in FY 12/13. By the end of FY15/16 they reached 0.7% of GDP.

35. For the target year of FY 2016, a level of 0.7 percent was reached, amounting to a more

than halving of the annual subsidies.

36. Originally a program target of 0.4 percent of GDP had been set. However, it was revised

because of continued government commitment to provide subsidies to consumers using up to

300kWh/month. Against the background of prevailing political economy, it was felt that

maintaining the subsidy at up to the 300kWh level would support the middle class in Pakistan at

a time when further social unrest was not desired. The cost of the subsidy did amount to 0.4% of

GDP.

37. As a complementary measure to reaching A1, a cap on circular debt was to be maintained

at levels less than PKR 314 billion. Circular debt is being referred to as the amount of cash

shortfall within the CPPA-G, which it cannot pay to power supply companies. This shortfall is

14

the result of (a) the difference between the actual cost of providing electricity and the revenue

realized by the Discos from sales to customers, plus subsidies; and (b) insufficient payments by

Discos to CPPA-G out of the revenue realized (due to prioritizing their own needs before

payments).

38. While the government maintains a cap as a goal of its policy, the level of circular debt

has de facto increased above the level of this cap reaching PKR 321 billion at the end of FY16,

and PKR 450 billion in November 2017. By comparison, the level of circular debt that was

eliminated as a result of the DPC program in 2013 was PKR 480 billion. The reason for the

resurgence of circular debt is that its sources have not been eliminated (higher than allowed

losses and lower than allowed collections).

39. Another complementary measure was the implementation of a mechanism based on

tariff surcharges and a Tariff Rationalization Fund to maintain nationally uniform tariffs in

Discos, while ensuring cost recovery. The background for this was that about 45 percent of all

electricity subsidies in FY12/13 were used to maintain the government’ policy of uniform

national tariffs. Under the historical implementation of the policy, the lowest determined tariff

for any consumer category among all Discos was notified, and the government made up the

shortfall in the Disco’s revenues from the budget.

40. This new measure was introduced in November 2014 and not foreseen when the first

operation in the series was prepared. It was taken in response to falling fuel costs and introduced

a surcharge that equalized the tariffs across seven of the ten Discos. The seven Discos affected

were those whose tariffs would have fallen because of the periodic fuel price adjustment. But

they were, due to the surcharge, maintained at their pre-November levels. The remaining three

Discos have continued to receive the subsidy indirectly from the other Discos to bring tariffs

down to the uniform rate.

41. As the implementation of the new tariff mechanism shows, the subsidy reforms were

helped by windfall gains produced alongside falling oil prices. As the example above

illustrates, those windfall gains were smartly used by the government to bring about structural

change. They also indirectly helped keep the needs for subsidies lower. For example, part of the

(negative) fuel price adjustment was no passed on to household and agricultural customers. The

available extra funds have de facto been used to help pay the generators, thus reducing the

subsidy needs and circular debt compared to a situation where a fuel price adjustment would

have been made. For FY15/16 the saving on the subsidy requirement due to oil price decline is

estimated to be in the order of 30 percent, equivalent to 0.25 percent of GDP.

42. While the measures undertaken under the Policy Area A have delivered the expected

results, and led to some overall fiscal relief, it is unclear whether the momentum can be

maintained and subsidies phased out over time. The goal was to achieve a permanent solution

of the circular debt problem by means of privatizing the Discos. While government remains

committed to this sale, it is currently not actively pursuing the sale.

43. In the absence of the planned privatization of Discos, however, there do not seem to be

sufficient incentives within the existing framework to lead to better performance by the Discos.

The last monitoring report by NEPRA for 2014/2015 highlights not only that trends for the

reduction in losses are not clear, but also that Discos deliberately misreport on load shedding,

and the System Average Interruption Frequency (SAIFI) and System Average Interruption

Duration Index (SAIDI). Further analysis on the incentive mechanisms prevailing among Discos

15

and potential political economy among stakeholders may help inform how long lived and

sustained the reform efforts undertaken under the DPC program will be.

Achievements under Policy Area B - Improving Sector Performance and Opening the

Market to Private Participation

44. This Policy Area considered both the downstream electricity provisions, and the upstream

supply of gas for power generation. The underlying theme was to identify key bottlenecks for the

private sector to operate in areas of the power sector that are commonly seen as being most

suited for private sector intervention.

45. To help improve collection and reduce distribution losses, one prior action to DPC 1 had

required the outsourcing of collections of four Discos (“MWP instructs the outsourcing”).

However, only PESCO and MEPCO proceeded with the outsourcing of the collection of feeders

with losses of 50 percent and above. This illustrates how difficult it can be to implement reforms

even once a requisite prior action has been met. In addition, the value added of the measure is

difficult to estimate.

46. For PESCO the results provided showed that in some feeders losses increased and overall

losses declined only slightly (from average losses in those feeders being 22.69% for the period

July – December 2013, average losses were 22.5% for the same period in 2014); and data

provided by PESCO did not allow assessing the impact on collection. Although the data included

the level of collection in the outsourced feeders, it did not include the period or the collection

level for the same feeders prior to outsourcing. Therefore, it was not possible to assess

improvements due to outsourcing, if any, in collections through the publicly available data.

47. Discos have not implemented revenue protection plans, nor have the Discos submitted

loss reduction paths for review by NEPRA before submitting their petitions. However, each

Disco has developed a program to reduce losses, improve meter reading and billing, and

collection. The programs have some similarities guided by measures that were required in

NEPRA’s annual tariff determinations, but there are also differences as conditions and

challenges vary. Nevertheless, the effect was the same: Discos became more accountable and

transparent. Undertaking quarterly review meetings with the IMF helped keep these measures on

track.

48. Results indicator B1: “Increase bill collection in Discos”. In FY14 bill collections were

89.1 percent and losses were 18.6 percent. Aggregate bill collections in FY16 were 94.6 percent

and losses were 17.9 percent. The target was therefore achieved.

49. The background to focusing on gas as part of the DPC series had been that while

domestic gas is a low cost source for power generation, it had lost share in generation because

the government had allocated gas to other sectors that pay below current average cost of supply

(such as household), thus reducing the availability of gas for power generation and creating poor

incentives to explore and produce domestic gas. The DPC focused on building up domestic

supply, which is cheaper and which reduces dependence on oil. While the domestic sector is

rebuilding, supporting LNG - which has a quicker response time – was to lead to quicker

availability of gas for power generation.

50. When looking at the history of the Bank’s engagement since the nineties, this is

surprisingly the first time that the gas sector came into the focus of reform efforts supported. As

illustrated above, the lack of focus on supporting power plant that were part of the least cost

16

expansion plan contributed substantially to the financial crisis in Pakistan’s energy sector in the

late nineties/early 2000s. Aside from hydropower, gas is technically an obvious choice to

support: gas-fired power plant in the energy mix provides for both least cost (among thermal

power plants) and baseload power.

51. Under DPC2, the original trigger was modified to better target some of the underlying

problems in accessing new gas resources: (i) that new and profitable agreements for further

domestic exploration needed to be signed, and (ii) that LNG gas needed to be made available at

full cost recovery level to supply those gas-fired power plants that were willing to offtake gas at

such prices. The wording of the respective triggers are presented in table 2.

52. In focusing and helping the Government meet these two actions, the team believed that

the gas supply would rapidly increase from 3.8 billion square cubic feet per day (bscfd) to 5

bscfd by the end of the reporting period (Result indicator B2: “Increased Gas Supply”). The gas

supply remained stable at the end of the reporting period at 3.9 bscfd (additional LNG coming

online in 2015 made up for some further domestic declines), and the overall gas supply will

reach 4.5 bscfd by mid-2018 with the commissioning of the second LNG terminal. The third

LNG terminal is expected to go online in 2020 and will bring overall supply to 5.1 bscfd.

53. Therefore, while the actual indicator has not been met within the timeframe targeted

under the program, the reform achieved in the sector is nevertheless considered groundbreaking

and will put Pakistan’s energy future on a much more sustainable pathway.

54. While the pricing reform helped bring in LNG terminal, the domestic gas target proved

unachievable because the regulator (Director General of Petroleum Concessions) is understaffed,

lacks capacity, and is not well structured. A World Bank sponsored dedicated Technical

Assistance program is underway in 2017/18 to help prepare a reform of upstream regulation.

55. Another results indicator for the downstream electricity sector was Result Indicator B3.

“Separation of market operations and transmission”. The Central Power Purchasing Agency

(Guarantee) Limited (CPPA-G) was incorporated in 2009 after its segregation from the “National

Transmission and Despatch Company” (NTDC). However, it continued its operations under

NTDC (as department of NTDC) until June 2015. With the help of the prior actions sought under

the DPC program, CPPA-G was spun off from NTDC and established as a separate entity.

56. The goal of the separation from NTDC was to minimize the conflict of interest that arises

by having both the dispatch of the system and the market operations housed within the same

organization. CPPA-G contracts with all power plants on behalf of the Discos and establishes the

merit order that will allow the dispatch center to do economic dispatch. Thus transparently

managed power trades were to open the sector up to competition and new investment.

57. In late 2017, CPPA-G has become a well-staffed independent entity, located in its own

office building, and with a well-designed website (2016) that provides clear information to all

market participants. Today all power contracted by IPPs, GENCOs and WAPDA Hydel are

being traded through the CPPA-G acting on behalf of the Discos. CPPA-G’s core functions

include: (i) settlement, (ii) power procurement on behalf of Discos, (iii) finance, (iv) legal and

corporate affairs, (v) strategy and market development, and (vi) monitoring and coordination.

The CPPA-G being the Market Operator is facilitating the power market transition from the

current single buyer to competitive market by overseeing the revisions of the Commercial Code.

17

58. However, the current role was entrusted to CPPA-G for a 24-month period up until June

2017 on the assumption that this would be sufficient for CPPA-G to be officially registered as

market operator. A revision in the legal base is now being processed in order for CPPA-G to be

able to continue to lawfully enter into and perform its obligations under the standard power

purchase agreements. The delay in the registration process of CPPA-G and in the review of the

Commercial Code, which CPPA-G is leading, illustrates that CPPA-G is still in transition to

becoming the agency it was intended to become and that transition to a wholesale market is still

some way ahead. Further support will be needed if these reforms are to be concluded

satisfactorily.

Achievements under Policy Area C – Ensuring Accountability and Transparency

59. The proposed measures under this Policy Area focused on building a transparent

accounting for all parties to enhance and build investor confidence. Given liquidity shortages in

the sector, generators are often paid less than they are owed by the Discos. IPPs, with obligations

to banks and suppliers, needed reassurance that they are not being discriminated against. Greater

accountability and transparency were expected to improve the quality of the structural reforms

overall by giving all stakeholders better access to information.

60. Prior actions here related to (i) CPPA-G publicly disclosing the monthly amounts due,

and payments made, by each Disco to CPPA-G; and (ii) NEPRA disclosing an annual report on

the performance of Discos, and outreach to consumers; and (iii) Discos to disclose on their

respective websites their annual performance reports, including their plans to improve service

delivery.

61. The CPPA-G website has improved and has more information, as required in the

Commercial Code though with some shortcomings. CPPA-G continues to make public (with

delays) on its website the daily payment instructions and the monthly amounts invoiced, payment

and outstanding for each Disco and K-Electric, and each type of generator. This disclosure partly

tracks the circular debt, and the payment discipline of each Disco. However, monthly settlement

data are not disclosed.

62. Although the prior action required publication of report for one FY, NEPRA disclosed

four performance evaluation reports for distribution licensees: for FY2012-2013, FY2013-2014,

FY2014-2015, and FY2015-2016. Each report included historical performance during a five-year

period, progress and issues for each distribution licensee, and comparison among Discos with a

ranking system. Additionally, NEPRA has prepared the performance evaluation report for

transmission licensees (NTDC and K Electric) for the period 2010-2014. NEPRA highlights the

need for better quality reporting by Discos to NEPRA. However, reporting is often much

delayed.

63. Lastly, each Disco disclosed in its website the performance information at a minimum for

FY2013-2014 sent to NEPRA in accordance to the Performance Standards (Distribution) Rules.

(Some Discos also published an additional FY performance information). Although for some

Discos the information is not easy to find in the respective websites, the action showed that the

Discos were willing to let their consumers know about the quality and reliability of their

distribution network services and commercial services. The websites of Discos are being updated

from time to time, and the links or menus of information may change with the upgrade. Progress

differs by Disco.

18

64. Under DPC1, MWP was also to prepare monthly reports. However, DPC2 combined both

triggers and focused on monitoring of performances through the regulator rather than

management by MWP. A survey was supposed to assess consumer awareness as a result of these

publications, but was not carried out. Anecdotal evidence suggests that the assumption that once

the public would get some information it would then go on to demand more information does not

seem to have been correct.

65. In conclusion, more data on the energy sector are available today than before the program

started. However, the quality and level of detail of disclosed data are still not sufficient for the

wider public to understand the underlying working of the energy sector.

3.3 Justification of Overall Outcome Rating

Rating:

DPC I: Satisfactory

DPC II: Satisfactory

66. The DPC program leveraged significant yet targeted reforms in Pakistan’s energy sector.

Both DPC 1 and 2 met most of the performance indicators, indicating only minor shortcomings

in the operation’s achievement of objective:

The Government reduced energy subsidies by more than half from 1.8 percent of GDP to 0.7

percent of GDP (in line with the target set under DPC2). Bill collection by DISCOs in

FY15/16 was 94.6 percent against 94 percent targeted.

The results indicator for the gas sector was not met, reflecting an overly optimistic

assumption that gas sector reforms would rapidly translate into increased net availability of

gas. Nevertheless, the reforms initiated as part of this program are projected to yield the

originally targeted increased gas availability by 2020 due to new LNG terminals coming

online.

Separation of market operations and transmission system operations, were fully met as all

contracted power generated by IPPs, GENCOs and WAPDA Hydel is being traded through

CPPA-G acting on behalf of Discos.

Disco performance reports and NEPRA reviews are now available on the website. The FY15-

16 report shows that NEPRA actively works on improving the quality of its reports to

provide all stakeholders with the best available information. Disclosure by Discos is mixed

and only few are updating this information regularly and comprehensively.

67. The DPC program was a central part of the Bank’s engagement in Pakistan and remained

fully consistent with the Bank’s country strategies and corporate goals, underlining the

relevance of the DPC program to the Bank’s engagement.

3.4 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

19

68. Poverty Impact: For each of the DPCs in the program a dedicated Poverty and Social

Impact Analysis (PSIA) was undertaken (Walker et al. 2014 and 2016). Since the subsidies for

consumers using up to 300 kWh/month have been maintained, no adverse indirect effects from

the reforms on low-income electricity customers compared to the status quo before the reforms

were expected. However, the PSIAs note that subsidies in energy continue to be regressively

targeted, many poor households remain exposed to high bills especially in the summer months,

and the poor can be better targeted.

69. Despite struggling to afford electricity, respondents appear willing to pay higher prices

provided service quality improves and governance problems are addressed. In line with the

findings of the PSIAs and in order to protect fully all the poor from the indirect reform impacts,

the government is also planning to provide income support to households in the bottom 20

percent of the population by poverty score. Broadening the coverage of the Benazir Income

Support Fund (BISP) payments and increasing the benefit in line with inflation was an indicative

trigger for the second operation in the proposed Fiscally Sustainable and Inclusive Growth DPC

that was developed in parallel.

70. Gender Aspects and Social Development: This program did not explicitly target gender

issues. The second PSIA conducted under this program (Walker et al, 2016) finds that reforms

targeting load shedding in Pakistan disproportionately benefits women because women are more

affected by load shedding and by the household’s efforts to manage electricity expenses since

they are on average the main users of electrical appliances and spend more time in the home.

(b) Institutional Change/Strengthening:

71. Institutional strengthening was part and parcel of the DPC program series:

The Bank provided technical assistance to the government in analyzing options to

introduce changes before the next round of tariff increases.

Separation and operationalization of CPPA-G helped NTDC focus on its core business.

Tariff and subsidy policy guidelines contributed to NEPRA’s development.

The gas sector reform led to the implementation of the 2012 Petroleum Exploration and

Production Policy, and helped strengthen the Ministry of Petroleum and Natural

Resources (MPNR). A follow-on technical assistance program supports wide ranging

reform of the upstream, midstream and downstream domestic gas sector that is a direct

result of the Prior Actions in this operation series.

72. The DPC program was inscribed in a wider context of capacity-building programs and

technical assistance on various fronts provided by developing partners including ADB, JICA,

USAID, and the Australian Department of Foreign Affairs and Trade.

(c) Other Unintended Outcomes and Impacts (positive and negative):

73. No unintended outcomes or impacts were observed.

3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops:

20

74. Not Applicable.

4. Assessment of Risk to Development Outcome

Rating: High

75. In the highly volatile political context of Pakistan outcomes of reform are inherently

under threat. This is not a function or result of any program in support of policy reform, but

reflects the nature of undertaking reforms in a politically charged and complex environment.

Those aspects of reform that are more remote to these politics will thus be able to experience a

lower risk of reversal (gas sector), while others that relate more closely to people’s lives have a

higher risk of reversal (distribution sector).

76. Results in the Pakistan context should also be measured against the counterfactual of

“what would have happened, had the program not been implemented.” It is thus worthwhile

noting that continuation of 2011/12 policies in the energy sector would have led to a financial

collapse of the sector, followed by a technical collapse (reflected in increasingly pronounced

load shedding). The financial collapse of the energy sector could have led to an overall fiscal

collapse of government. The DPC program was an essential part of an overall donor effort to

avert such crisis.

77. The following are the key risks to the development outcomes reached under the program:

Risk of reversal of key reform actions, especially those that led to institutions having to

divest previous powers. In a volatile political context, it is challenging to keep reform efforts on

track or to keep them even at the level of status quo. Thus the newly acquired status of the

CPPA-G as independent agency remains under threat as the agency’s roles and responsibilities

remain to be formally confirmed. Also, there is uncertainty at least as to the future of

privatization of Discos, which was to help eliminate the problem of circular debt.

The DPC required CPPA-G, Discos and NEPRA to disclose information according to

prescribed formats. Certain quality and timing issues aside, reporting has been adequate thus far.

However, there is a risk that stakeholder pressure may lead to discontinuation of certain reports,

especially if they portray sector participants in a negative light. An example could be that some

Discos are already not accurately reporting on their actual outages.

There is a high risk of political, social and industrial opposition to further reform if service

quality does not improve. Although increases in billing levels have been offset by lower oil

prices with consumers seeing little change in electricity bills, there is a risk that stakeholder

expectations of service quality improvement, especially a reduction in load shedding, will be

unfulfilled. There is also a risk that worsening security or political situation could distract

government from reforms, which may be tied to a widespread non-acceptance of the reforms and

manifest itself as social action or unrest, for example by consumers refusing to pay their bills.

Pakistan’s vulnerability to external and internal shocks causing macroeconomic

fluctuations could derail macroeconomic stability. While the government has a strategic action

plan under the National Power Policy 2013, delays or ineffective implementation of policy

measures may result in government not being able to maintain subsidy support to the power

sector.

The risk that vested interests will oppose measures to commercialize, increase

accountability and raise access to information is considered high. Therefore, there is further

need for closer dialogue and support to NEPRA in implementing reform measures.

21

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating:

DPC I: Highly Satisfactory

DPC II: Highly Satisfactory

78. The Bank worked closely with the government to identify reforms and to follow-up on

the progress. The quality at entry was ensured by a strong program of support outside the DPC to

help facilitate technical assistance and guidance in the trigger selection and execution. As a

result, all triggers were made into prior actions with fewer changes than normally associated with

programmatic DPCs. This demonstrated the strategic relevance and the buy-in of the

government’s commitment. The DPCs were prepared in close collaboration with the ADB, JICA,

and the IMF. This provided a harmonized approach to policy-based lending and also reduced the

government’s transactional costs.

(b) Quality of Supervision

Rating:



79. During implementation, the Bank's performance was highly satisfactory. The Bank

focused on the program’s development impact and allocated sufficient budget and staff

resources, to carry out adequate supervision by closely monitoring program activities. Aide-

Memoires were prepared to alert the government on issues found during implementation and

prompt corrective actions were taken when necessary. The Bank deepened the policy dialogue

with the institutions involved in the implementation of reform program, and ensured the

availability of staff and specialists to advise the government on all policy and technical areas

involved.

80. The task team closely monitored the program’s progress and worked effectively with

Country Management Unit management in dialogue with the government. Vice President Unit

level assistance was also provided as necessary to support the ongoing dialogue. The program

was developed in close collaboration with the IMF, thus leveraging their US$6.6 billion

program. The World Bank team participated in the IMF quarterly meetings that closely

monitored progress of the implementation of the reforms. Close coordination also helped the

IMF in their program, allowing them to conclude their first program in Pakistan in more than a

decade. To improve synergies, the JICA and ADB also participated in the Bank’s relevant review

meetings.

(c) Justification of Rating for Overall Bank Performance:

22

Rating:



81. The overall rating for the Bank Performance is Highly Satisfactory. The Bank worked

closely with the government, the IMF and development partners to develop a relevant reform

agenda that strategically addressed several core constraints in the country while delivering the

program on time.

5.2 Borrower Performance

Rating:

DPC I: Satisfactory

DPC II: Satisfactory

82. For the Government, MoF monitored the implementation of the overall program jointly

with the Bank, ADB and JICA. The quarterly review meetings were set to coincide with IMF’s

quarterly reviews. MoF, with support from the Prime Minister’s office took close ownership of

the program development and implementation and worked closely with the Bank team in the

design and implementation of this program.

83. MoF also took responsibility for the overall supervision and monitoring of program and

furnished relevant documents to the Bank to validate program’s progress. The overall support,

provided by the Prime Minister’s office, helped the implementing agency in proper coordination

and communication in program development and implementation.

84. At the level of the sector, MWP led the overall implementation of the program. Both

MWP and MPNR had focal points/delivery units to help with the implementation of the reform

process across sector institutions. As is to be expected when substantial reforms are

implemented, not all parts of the government agreed with all elements of the reform. On the side

of MWP there may have been a concern of losing control over the management of the sector.

Following completion of the program – once the government had received the necessary funds to

stabilize its finances - momentum at the level of the government was lost especially in

privatization of the Discos.

85. The Borrower’s ownership of the program during preparation and implementation was

adequate and their commitment was evident in their successful implementation of the prior

actions and interest in the implementation of the program.

X Click here if the Government and the Implementation Agency is the same or indistinguishable.

6. Lessons Learned (both operation-specific and of wide general application)

86. The following lessons were learned from the development and implementation of this

operation:

23

Focusing on the challenges of the power sector alone brings tangible results: In this series

of DPCs, the government and the task team have actively sought out critical challenges in the

sector and focused only on energy. When undertaking broader policy DPCs there may be an

inherent pressure to adopt more lenient sector targets (or adjust targets), because the sector does

not want to hold the entire economy-wide program “hostage”. Instead, the team was able to

actively change and adjust triggers and measures from DPC1 to DPC2, allowing to push the bar

further than originally envisaged. This finding is well aligned with the IEG (2005) report on

DPCs.

The government’s ownership of reform is necessary for the success of a DPC operation. In

the case of this operation, the government’s ownership, interest and involvement in the reform of

power sector was most focused while the need for budget support dominated its priorities. When

these were no longer present, the leverage of MoF over MWP diminished, and MWP reasserted

its interest in keeping control of the sector.

A balanced approach between instruments targeting federal and sectoral levels can help

bring about more sustained results. Federal DPCs have supported IMF programs to stabilize

country macroeconomics by providing budget support for reforms aimed at improving energy

sector sustainability and private sector growth. However, with limited domestic resource

mobilization and high circular debt, the risks remain. A more strategically balanced mix of

budget support with other Bank instruments can help leverage more sustained results. A key

lesson has been the need for sectoral ownership of ‘tough’ reforms. To sustain incentives for the

sector stakeholders to move reform forward, instruments that allow working directly with the

sector are important tools. The ongoing technical assistance for the gas sector is demonstrating

that the impetus created by the DPC program can be sustained with the help of this TA. Going

forward, the use of a program for Results Financing (PforR)4/

could also be considered as a

means to providing direct incentives at the line Ministry level.

Allowing for differentiated gas pricing helped break a deadlock over gas supplies. Rather

than only focusing on how the domestic supply could be enhanced to curb the shortage of gas

supplies in Pakistan, the client deliberately considered how the domestic supply could be

complemented with LNG. Recognizing that any new LNG terminal would need to cover its

costs, the surprisingly simple solution was to allow for price differentiation. Accordingly, a ring-

fenced full-cost recovery model for LNG was adopted by Government. In 2017, one LNG

terminal is in operation and one under construction at Port Qasim. Three other terminal projects

are in various stages of development.

Close collaboration with IMF and other donors benefits the program, the client, and the

development institutions. Closely aligned positions among donors help push through difficult

reforms. While this is common knowledge, in the context of the DPC program it may be

worthwhile noting that the collaboration with the Bank’s program arguably led to the effective

completion of an IMF program: the only IMF program out of 18 programs with Pakistan that was

concluded effectively.

4 approach which has unique features such as using a country’s own institutions and processes, and linking

disbursement of funds directly to the achievement of specific program results.

24

It can be difficult to implement reforms even once a requisite prior action has been met: To

help improve collection and reduce distribution losses, one prior action to DPC 1 had required

the outsourcing of collections of four Discos (“MWP instructs the outsourcing”). Even though

this prior action was met, only PESCO and MEPCO proceeded with the outsourcing of the

collection of feeders with losses of 50 percent and above.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/Implementing Agencies: N/A

(b) Co-financiers: N/A

(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society): N/A

25

Annex 1: Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

First Power Sector Reform Development Policy Credit (P128258)

Name Title Unit

Richard Jeremy Spencer TTL and Lead Energy Specialist AFCE3

Beatriz Arizu de Jablonski Consultant GEE06

Rashid Aziz Senior Energy Specialist SASDE - HIS

Kristin Anne Mayer E T Consultant SASDE - HIS

Kazim M. Saeed Consultant GEE06

Mohammad Saqib Senior Energy Specialist GEE06

Tjaarda P. Storm Van Leeuwen Adviser AFTG1 - HIS

Mehwish Ashraf Economist GMF06

Abid Hussain Chaudhry Program Assistant SACPK

Robert Michael Lesnick Consultant GEE06

Jose Lopez-Calix Program Leader AFCW3

Ameet Morjaria Consultant DECDP

Martin Serrano Senior Counsel LEGES

Thomas Walker Senior Economist GSP06

Paul Welton Lead Financial Management Spec GGO24

Second Power Sector Reform Development Policy Credit (P152021)

Name Title Unit

Richard Jeremy Spencer TTL and Lead Energy Specialist AFCE3

Beatriz Arizu de Jablonski Consultant GEE06

Umul Awan Local Consultant ST CASEE

Defne Gencer Senior Energy Specialist GEE06

Kazim M. Saeed Consultant GEE06

Mohammad Saqib Senior Energy Specialist GEE06

Martin M. Serrano Senior Counsel LEGES

Michael C. Stanley Lead Mining Specialist GEEDR


Khalid Bin Anjum Senior Procurement Specialist GGO06

Mehwish Ashraf Economist GMF06

Rachid Benmessaoud Country Director AFCW2

Helene Bertaud Lead Counsel LEGES

Anwar Ali Bhatti Financial Analyst SACPK

Enrique Blanco Armas Lead Country Economist GMF06

Abid Hussain Chaudhry Program Assistant SACPK

Anthony Cholst Operations Adviser SACPK

Akram El Shorbagi Sr. Financial Management Spec GG024

26

Boonsri Kim Program Assistant GEE06

Jose Lopez-Calix Program Leader AFCW3

Peter Meier Consultant GEESO

Victoria Minonian Consultant GEE06

Uzma Sadaf Senior Procurement Specialist GGO06

Sebnem Sahin Senior Environmental Specialist GENGE

Thomas Walker Senior Economist GSP06


(b) Staff Time and Cost (from SAP) (the system pulls data available for all fields)

Stage

Staff Time/Cost

(Bank Budget Only)

No. of staff

weeks

USD (‘000)

(including travel

and consultant)

First Power Sector Reform Development Policy Credit (P128258)

Lending

FY13 5.62 54,809

FY14 20.91 334,068

Supervision

FY15 (BB + TF) 26.69 320,305

FY16 (BB + TF) 1.50 21,049

Total: 54.72 730,231

Second Power Sector Reform Development Policy Credit (P152021)

Lending

FY15 33.76 265,518

FY16 24.89 156,405

Supervision

FY16 4.11 28,892

FY17 6.28 48,243

Total: 69.04 499,058

27

Annex 2: Development Outcome Indicators

Key Results Indicators, as listed in Annex 1 of the Program Documents:

Indicator Baseline Value DPC1 Target

(end FY15/16)

DPC2 Target

(end

FY15/16)5

Actual Achieved

at Completion or

Target Years


A.1. Subsidies allocated in

Federal budget (as % of budget) 1.80% 0.40% 0.80% 0.70%


Comments (incl. % achievement) DPC2 target overachieved. Original target changed from 0.4% to 0.8%

of GDP (see table 2).


B1. Increased bill collection in

DISCOs (% of total billing) 86% 90% 94% 94.60%


Comments (incl. % achievement) Targets overachieved.

B2. Increased gas supply 3.8 billion SCFD 5 billion SCFD 3.9 billion SCFD


Comments (incl. % achievement) Target not achieved at the target date.

B3. Separation of market

operations and transmission

system operations

Market and

system operations

in single entity

(NTDC/ CPPA)

All contracted

power generated

by IPPs,

GENCOs and

WAPDA Hydel

traded through an

independent

CPPA

All contracted

power generated

by IPPs,

GENCOs and

WAPDA Hydel

traded through an

independent

CPPA


Comments (incl. % achievement) Target achieved.


C1. Disco performance reports

and NEPRA review published None Yes Yes


Comments (incl. % achievement) Target achieved.

5 DPC2 target mentioned in this column, if the value was revised compared to its original value under DPC1.

28

Annex 3: Stakeholder Workshop Report and Results

Not Applicable

29

Annex 4: Summary of Borrower’s ICR and/or Comments on Draft ICR

The Borrower has prepared two separate reports summarizing their assessment of the reform

efforts:

On downstream energy sector reform, the Ministry of Water and Power (MWP) has provided an

assessment of overall reform efforts in their March 2017 Monitoring Report. It reviews progress

of the efforts jointly supported by the World Bank, ADB, and JICA from about 2013 up until

2017 under the first two phases of the program, while the last phase is still underway and

supported only by ADB. The reform program is rated as satisfactory throughout in the report

with most of the targets achieved. The report poignantly describes the situation pre-reform where

there was a shortfall of about 5,000 MW of power leading to 12 to 16 hours of load shedding all

across Pakistan. Post reform, the gap is said to have shrunk with an addition of 1,700 to 2,000

MW to the grid and about 5-6 hours of load shedding across the country. It notes a few measures

to be still outstanding such as the privatization of the Discos. The report finds that MWP’s

performance in supporting the sector reform was highly satisfactory. There is no assessment of

donor performance in the report.

On upstream gas sector reform, the Ministry of Petroleum and Natural Resources (MPNR) - has

provided an assessment of the gas sector reform efforts undertaken between 2013 and 2017. The

review accounts the history of gas reform as a client led activity that was started in 2013 under

the heading of “Sustainable Energy Sector Reforms Program” and focused on the

implementation of the 2012 Petroleum Exploration and Production Policy. It was described as

having been supported by donors, including World Bank, Asian Development Bank (ADB), the

Japan International Cooperation Agency (JICA), and USAID. The report highlights that the

involvement of above donors has been “very instrumental in approaching towards the

Government’s objectives in a structure manner.” The report from MPNR notes that the process

of unbundling of the gas companies has been going more slowly than expected. The unbundling

process is being steered by a Gas Leadership Committee. The report notes that a lesson learnt

from these processes could be to put a periodic reporting and monitoring mechanism along with

them to keep the momentum going after the initial triggers are met.

30

Annex 5: Comments of Co-financiers and Other Partners/Stakeholders

Not Applicable.

31

Annex 6: List of Supporting Documents

1. Program Documents

Report No. 86031 – PK

Report No. 100233 – PK

2. Letter of Development Policy

3. Tranche Release Document

4. Aide-Memories/ISRs

5. USAID. The Causes and Impacts of Power Sector Circular Debt in Pakistan. Commissions

by the Planning Commission of Pakistan. March 2013.

6. Trimble, C., N. Yoshida, and M. Saqib (2011). Rethinking Electricity Tariffs and Subsidies

in Pakistan. World Bank Policy Note. Report No. 62971-PK.

7. Fraser, J. M. (2005). Lessons from the Independent Private Power Experience in Pakistan.

World Bank Energy and Mining Sector Board Discussion Paper No. 14, May 2005.

8. Aziz, R. (2013). Pakistan Policy Note 1. Building an Efficient Energy Sector. The World

Bank Group, South Asia Region.

9. NEPRA. Performance Evaluation Report of All Distribution Companies (IESCO,

PESCO, GEPCO, FESCO, LESCO, MEPCO, QESCO, SEPCO, HESCO, K-Electric) for the

Year 2014-1

10. Government of Pakistan/Ministry of Petroleum and Natural Resources (Monitoring and

Evaluation Unit). Monitoring and Evaluation Report July 2013 – March 2017.

11. Ministry of Water and Power (2017). MONITORING REPORT – MOWP Energy Sector

Reforms Program till March 2017. http://mowp.gov.pk/mowp/userfiles1/file/Monitoring.pdf

12. Walker, Thomas; Sahin, Sebnem; Saqib, Mohammad; Mayer, Kristy. 2014. Reforming

Electricity Subsidies in Pakistan: Measures to Protect the Poor. World Bank Policy Paper Series

on Pakistan; PK 24/12. World Bank, Washington, DC. © World Bank.

https://openknowledge.worldbank.org/handle/10986/21569 License: CC BY 3.0 IGO.

13. Walker, Thomas; Canpolat, Ezgi; Khan, Farah Khalid; Kryeziu, Adea. 2016. Residential

Electricity Subsidies in Pakistan: Targeting, Welfare Impacts, and Options for Reform. Policy

Research Working Paper; No. 7912. World Bank, Washington, DC. © World Bank.

https://openknowledge.worldbank.org/handle/10986/25811 License: CC BY 3.0 IGO.”

14. Information from agency websites: npra.org.pk; www.ntdc.com.pk; www.cppa.gov.pk

http://mowp.gov.pk/mowp/userfiles1/file/Monitoring.pdf

http://www.cppa.gov.pk/